• 3QFY15 DPU +0.5% YoY
• Positive rental reversions of 5.3% in 3QFY15
• Potential AEI

3QFY15 results met our expectations

Frasers Centrepoint Trust’s (FCT) 3QFY15 gross revenue jumped 14.3% YoY to S$47.1m due to stable organic growth and additional contribution from Changi City Point (CCP), which was acquired on 16 Jun 2014. NPI rose 12.8% YoY to S$32.9m, while DPU inched up 0.5% to 3.04 S cents.

For 9MFY15, FCT’s gross revenue and DPU grew 16.1% and 4.1% to S$141.8m and 8.75 S cents, respectively. The latter constituted 74.1% of our FY15 forecast. If we add back S$0.5m of income retained in 9MFY15, which we expect to be distributed in 4QFY15, adjusted 9MFY15 DPU would have formed 74.6% of our full-year projection.

Operational trends still healthy

FCT experienced an encouraging 3.6% YoY growth in shopper traffic for its malls (excluding CCP), while tenants’ sales rose 2.2% YoY from Mar-May 2015, highlighting the resiliency of its portfolio amid softness in the retail industry. Average rental reversions of 5.3% were achieved in 3QFY15, bringing 9MFY15 rental uplifts to 6.2%.

Although Anchorpoint’s rental reversion was -5.1% in 3QFY15, the space renewed made up only 1.7% of the mall’s NLA. With 20.5% of NLA expiring at Anchorpoint for the remainder of FY15, management assured us that the negative rental reversion in 3QFY15 was not representative of the sentiment at the mall, and remains optimistic on achieving positive rental reversions for the upcoming renewals.

Overall portfolio occupancy stood at 96.5% (-0.6 ppt QoQ), with the drag emanating largely from a lease expiry of an anchor tenant at Bedok mall (9% of NLA). FCT is currently in negotiations with prospective tenants, including a gym operator.

Maintain BUY

Looking ahead, while FCT does not have any concrete acquisition targets in the near-term, it is exploring the option of carrying out asset enhancement initiatives at Northpoint, with a targeted double-digit ROI. We believe management will be able to achieve its target given its previous AEI track record at Causeway Point.

We fine-tune our assumptions and ease our FY15-16F DPU forecasts slightly by 0.5%-1.9%, but we reiterate our BUY rating on FCT, with a marginally lower fair value of S$2.24 (previously S$2.27).

Source: OCBC Research - 23 Jul 2015